Japan Cites ‘Weakening’ Economy

The Japanese government downgraded its assessment of the economy today for the third straight month, citing declining production and exports.

Using the word “weakening” for the first time since September 1995 to describe Japan’s struggling economy, the government’s monthly report also nudged down its view on several key sectors, including jobs, housing, profits and business sentiment.

“The economy is weakening, reflecting the slowdown of the U.S. economy,” it said. “Japanese exports have faltered, resulting in a decline in production.”

In addition to high unemployment rates and declining job offers, the Cabinet Office highlighted worries over the outlook for corporate capital spending, a key engine of recovery.

“Movements toward a self-sustaining recovery in the corporate sector continue, but they have weakened in recent months.”

Haruhito Arai, a counselor for economic policy at the Cabinet Office, said weaker business sentiment shown in a Bank of Japan survey released this month was one reason behind the government’s decision to downgrade its view on corporate activity.

Arai said it was too early to declare a recession. “To decide whether the economy is in a recessionary phase, we have to see how weak the economy is and how long it remains weak,” he said.